The country could sharply step up production of enriched uranium to a purity that could be quickly improved to bomb grade, says the United Nations' watchdog agency.

WASHINGTON — Iran has finished installing centrifuges at a fortified underground facility and can sharply increase production of enriched uranium to a purity that can be quickly improved to weapons grade, the United Nations nuclear watchdog agency said Friday in a report likely to stir new concern in the West about Tehran's nuclear ambitions.

According to the report by the International Atomic Energy Agency, Iran has prepared 700 more centrifuges at the Fordow facility for operation since August, doubling the plant's enrichment capacity. If all of them produced 20% enriched uranium, which can be improved to bomb grade with relative ease, it would cut to about three months, down from six, the time needed to accumulate enough fissile material for a nuclear bomb.

The report says Iran has installed 2,800 centrifuges at Fordow, the total the facility is designed to hold. But half are not ready to begin operation.

Iran insists its nuclear program is only for peaceful uses. But many nations believe that it aims to acquire a bomb-making capability, and the five members of the U.N. Security Council plus Germany have tried to persuade Iran to accept curbs on the effort.

The six countries made little headway in negotiations with Iran this year, but the group will meet next week in Brussels with Catherine Ashton, the European Union's foreign policy chief, to set plans to resume talks with Iran.

The IAEA, based in Vienna, said Iran has expanded its stockpile of medium-enriched uranium by 43 kilograms since August, to a total of 233 kilograms, nearly enough to create fuel for a bomb. At the same time, Iran has diverted 96 kilograms of the total for use as civilian reactor fuel, which makes it harder to use the material for a bomb.

That leaves about 137 kilograms enriched to 20%. Experts say 200 to 250 kilograms are needed for a single bomb.

Ehud Barak, Israel's defense minister, said in October that Iran's diversion of fuel for the reactor indicated that Iran was moving more slowly toward bomb-making capability, and had pushed back the "moment of truth" for its bomb program by 10 months or so.

The IAEA report, however, suggests Iran is not slowing its program, but is poised to accelerate its output.

President Obama said at a news conference this week that a "window" remains for a diplomatic solution. But he repeated his campaign vow that he will not allow Iran to obtain a bomb, language used to convey a threat of war.

U.S. officials said that even if Iran produced enough enriched uranium for a bomb, it would require many more months to engineer and build one. They insist that U.S. intelligence would have early warning and could intervene to stop it.

The Arms Control Assn., an advocacy group, said the IAEA report provides "further troubling evidence that Iran is continuing to pursue sensitive nuclear fuel-cycle activities in violation of U.N. Security Council resolutions and is slowly enhancing its nuclear weapons breakout potential."

But the Washington-based group said Iran "remains years, not months, away from having a workable nuclear arsenal if it were to choose to pursue that capability."

Cliff Kupchan, an analyst with the Eurasia Group consulting firm, said it was significant that Iran has refrained from increasing production of medium-enriched uranium even though it now can do so.

Iran is "carefully calibrating development of its nuclear program to gain leverage at coming talks … while also slowly but steadily increasing the threat facing the West," he said.